Big firms plan to raise capital expenditures by 10.9 percent in the fiscal year that started April 1, compared with their previous plan to boost capital spending by 9.3 percent.
The tankan's sentiment indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.
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Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, said that the index indicated conditions were "not that bad."
"This suggests the economy may not contract in the third quarter," he said. "Overseas demand is expected to improve in the future, so companies think recent turmoil caused by overseas economies is temporary. Domestic demand doesn't look great, but it is unlikely to deteriorate much from here.
"The BOJ is still likely to ease policy and we expect easing at the end of the month. The problem is the price trend and inflation expectations.